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Full Text of Decision

35435

42368SERVICE DATE – FEBRUARY 6, 2013

EB

SURFACE
TRANSPORTATION BOARD

DECISION

Docket No. AB 1075X

Manufacturers Railway Company—Discontinuance
Exemption—

in St. Louis County, Mo.

Digest:[1]On remand from the United States
Court of Appeals for the District of Columbia Circuit, the Board explains that
a rail carrier that is authorized to
stop providing rail service over its entire rail system will be required to
provide the statutory employee protection if the rail carrier: (1) will continue to own the lines subject to
the Board’s jurisdiction after it stops service, and (2) will remain a
regulated entity enjoying the benefits that flow from being subject to the
Board’s jurisdiction.Accordingly,
the Board permits Manufacturers Railway Company to stop providing service over
its entire rail system in St. Louis, Mo., subject to standard employee
protective conditions.

Decided:February 5, 2013

By a decision served on July 12, 2011 (July 2011 Decision), the
Board authorized Manufacturers Railway Company (MRS) to discontinue service
over its entire 13.5-mile rail system, located in St. Louis, Mo.[2]In authorizing the discontinuance, the Board
imposed the employee protective conditions set forth in Oregon Short Line
Railroad—Abandonment Portion Goshen Branch Between Firth & Ammon, in
Bingham & Bonneville Counties, Idaho, 360 I.C.C. 91 (1979) (Oregon
Short Line).Those conditions carry
out the statutory provisions at 49 U.S.C. § 10903(b)(2) directing the Board to impose employee protection on
abandonments and discontinuances.

A reviewing court concluded that the
July 2011 Decision was an unexplained departure from the agency’s “Entire
System Abandonment Policy.”SeeMfrs.
Ry. v. STB, 676 F.3d 1094 (D.C. Cir. 2012) (Manufacturers).Under
that policy, the agency would not impose employee protection in cases where a
railroad abandons or discontinues service over its entire system. The agency adopted that policy because, in
such cases, the railroad would not be maintaining rail operations that would provide
other employment opportunities for affected workers or generate revenue to fund
employee dismissal allowances.Seeid.at 1095, 1097 & n.4.The reviewing court disagreed with the
Board’s conclusion that the unusual circumstances of this case brought it
outside of the Entire System Abandonment Policy, and it remanded the matter to
the agency so that the Board could either apply the policy or explain its
departure from it.

In this decision, the Board creates
an explicit exception to the Entire System Abandonment Policy and explains our policy
rationale for this change.We will impose
the statutorily required employee protection whenever the railroad that is
seeking to discontinue service on its entire rail system will continue to own
the lines after it stops service and will remain a Board-regulated entity—the
circumstance presented in this discontinuance proceeding.[3]

BACKGROUND

This case revolves around the
distinction between abandonment authority and discontinuance authority.Abandonment authority allows a railroad to terminate
permanently its obligation to provide common carrier service over a line upon
reasonable request and remove the line permanently from the national
transportation system.Once a railroad
exercises Board-granted abandonment authority, the Board’s jurisdiction over
the line ends.Discontinuance authority,
in contrast, allows a rail carrier, for an indefinite period, to be relieved of
its common carrier obligation to offer (and, upon reasonable request, provide)
rail service.If a carrier discontinues
service over, but does not abandon, a line that it owns, the line remains part
of the national transportation system and subject to the Board’s jurisdiction,
and the carrier has the option of resuming common carrier operations over the
line in the future without obtaining new Board authority.Discontinuance by an operator of its
operating authority over a line that it does not own, in contrast, means that
the operator is terminating all of its Board-granted common carrier authority over
the line.Thus, a carrier that operates
solely over lines it does not own and seeks to discontinue operations over its
entire system is similarly situated to a carrier that owns its lines and seeks
to abandon its entire system, in that both seek to terminate all of their Board-issued
common carrier authority and exit the Board-regulated rail industry.In contrast, a carrier that owns its lines
and seeks only to discontinue operations over, but not abandon, them does not
seek to exit the regulated industry.

MRS is a Class III carrier wholly
owned by Anheuser-Busch Companies, Inc.MRS seeks discontinuance authority for its entire rail system, which is
made up of 13.5 miles of rail lines and storage tracks located within the area
bordered by Cedar Street on the north to Zepp Street
on the south, and the Mississippi River flood wall on the east to U.S.
Interstate 55 on the west, in St. Louis, Mo. The rail lines at issue, which are
owned and operated by MRS, consist of:(1) the Brewery Line, an approximately 1-mile line running from Lesperance Street to Dorcas
Street along the wharf; and (2) the Second Street Line, an approximately
2.6-mile line running from Zepp Street to Cedar
Street, mostly embedded within the right-of-way of Second Street.

MRS’s only remaining shipper is Anheuser-Busch,
Incorporated (ABI), another subsidiary (along with MRS) of Anheuser-Busch
Companies, Inc.In March 2011, ABI
stopped outbound shipments of beer by rail and since then has only received, on
average, 6-7 inbound carloads of grain, celite, and magnesite per day by rail, generating $1.28 million in
annual revenue for MRS.In seeking
discontinuance authorization, MRS stated that the revenue from its operations (including
switching services and miscellaneous services such as lease of railcars, car
storage, repair, and painting services) is insufficient to cover its extensive
annual maintenance and operating costs.While
MRS sought to discontinue service over its lines, it stated that it did not
intend to remove the track or rail assets comprising the lines.Rather, MRS stated that ABI intended to contract
with a non-carrier third-party switching provider to continue to receive
inbound freight shipments over the rail lines.

Although the Board’s Entire System
Abandonment Policy was originally applied only to abandonments, it was, in a
few cases, extended to certain situations in which a carrier discontinued all
of its rail services.[4]Here, MRS argued that employee protective
conditions should not be imposed because it is seeking to discontinue service
on its entire system.Rail labor
representatives challenged the continuing viability of the Entire System Abandonment
Policy and requested that the Board condition its authorization of
discontinuance on the imposition of employee protection.

In its July 2011 Decision,
the Board authorized MRS to discontinue its operations, subject to the employee
protective conditions set forth in Oregon Short Line.The Board found that the Entire System Abandonment
Policy remains viable, but concluded that it would be inappropriate to apply
that policy here, where the carrier seeking discontinuance would continue to
own the lines on which the common carrier service was being terminated and would
remain a regulated entity. July 2011
Decision, slip op. at 4-5.The Board
viewed this case as one of first impression because, unlike previous entire-system
discontinuances—which involved circumstances that were tantamount to
abandonment because the lines at issue were not owned by the discontinuing
carrier—here MRS would retain the right
to operate over its lines as a common carrier in the future and would remain a
regulated entity after discontinuance.The
Board explained that, “by seeking only an entire-system
discontinuance (but not an entire-system abandonment) MRS is deliberately
choosing to give up only part of its legal authority—its present obligation to
operate over the lines, while retaining ownership of its lines—and as a result
remains subject to the Board’s jurisdiction.” Id. at 6.The Board determined that the rationale
behind the Entire System Abandonment Policy—“that no carrier remains to provide
the benefits sought by employees”—did not apply in this context, where MRS
would enjoy the benefits of remaining a regulated entity.The Board concluded that MRS had provided no
basis for extending the Policy to situations like this one.Id.

MRS sought judicial review of the
Board’s July 2011 Decision in Manufacturers, arguing that the
Board had departed without justification from the Entire System Abandonment
Policy.The court agreed.It concluded that
the rationale for which the Entire System Abandonment Policy was originally
developed—i.e., that the
railroad would lack the employment opportunities or the ability to derive
revenue from ongoing rail operations with which to provide employee protection[5]—applied
equally to MRS in this case. Manufacturers, 676 F.3d at 1096, 1097 n.4.The court
held that the Board, therefore, had failed adequately to explain its deviation
from its longstanding Entire System Abandonment Policy.Id. at 1097.The court thus vacated and remanded
the Board’s decision.

DISCUSSION AND CONCLUSIONS

An agency has the discretion to modify, narrow, or completely set aside
prior agency precedent as long as it offers a reasoned basis for its
decision.See, e.g.,
Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir
1971) (“[A]n agency changing its course must supply a reasoned analysis
indicating that prior policies and standards are being deliberately changed,
not casually ignored . . . .”).After
reconsidering this matter in light of the court’s decision and carefully
reviewing agency precedent, we find it appropriate to create an explicit
exception to our Entire System Abandonment Policy to cover the situation
presented here, where the carrier seeking to discontinue service over all of its
lines will continue to own the lines and will remain subject to the Board’s
jurisdiction.As the court noted, the historical
factual rationale for that policy—the absence of rail carrier operations on
other lines that would provide employment opportunities or revenue sources for
affected employees after abandonment or discontinuance of the railroad’s entire
rail system—applied to MRS.We conclude,
however, that a separate policy concern overrides that fact-based rationale in
a specific subset of discontinuance cases.Accordingly, even though a carrier seeking discontinuance authority over
its entire system will no longer earn operational revenues to cover the costs
of employee protection or have other lines to which employees can be
transferred, it will be excepted from the agency’s Entire System Abandonment
Policy—and thus be subject to statutory labor protection—if it will continue to
own its rail lines and thus remain a carrier subject to the Board’s
jurisdiction.

There are two factors that lead to our decision to create an exception to
our Entire System Abandonment Policy for this situation.First, narrowing the circumstances under
which the Board would not order statutory employee protection is more consistent
with § 10903(b)(2), which specifically directs
the Board to impose “as a condition of any abandonment or discontinuance
. . . provisions to protect the interests of employees.”The plain language of the statute creates a
powerful presumption in favor of imposing employee protection in abandonments
and discontinuances, and for narrowly applying the regulatory policy that created
an exception to Congress’ directive.

Notwithstanding the plain language
of the statute mandating employee protection in all abandonments, the agency’s
Entire System Abandonment Policy, which predates the statutory language, has
been held to be permissible under that language.SeeRy. Labor Execs. Ass’n v. ICC, 735 F.2d 691 (2d Cir. 1984).The Board’s predecessor, the Interstate
Commerce Commission, determined that Congress, in enacting the original version
of employee protection statutory language in the Rail Revitalization and
Regulatory Reform Act of 1976, Pub. L. No. 94-210, 90 Stat. 31 (1976), did not
intend to alter the Entire System Abandonment Policy.We need not revisit that determination
here.Nothing in this decision changes
the scope of the Entire System Abandonment Policy as regards a rail carrier
that seeks to abandon its entire rail system, or a rail carrier that seeks to
terminate its operating authority over tracks owned by another carrier.In those circumstances, because the rail
carrier is exiting the rail transportation system and will no longer be a
Board-regulated entity, the policy will continue to apply.But we believe that Congress gave the Board
the discretion to define the parameters of the Entire System Abandonment Policy
and that our decision to create an exception to that policy here is consistent
with the language of the statute we administer.

Second, as a policy matter, we do not think Congress intended to deprive rail
employees of labor protection when the carrier seeks to terminate service over
its entire rail system on tracks that it owns but that will remain subject to
the Board’s jurisdiction.This is
because such a carrier will continue to enjoy several benefits associated with remaining
a regulated carrier.[6]Its rail properties will continue to be federally
preempted from the application of many state and local laws, such as zoning and
environmental permitting regulations. This
means that an entity like MRS could undertake major alterations to its property
unburdened by many state and local regulations that would have applied had it sought
abandonment rather than discontinuance authority.[7]Discontinuance also carries with it the
right of “reactivation;” hence, a carrier such as MRS that owns the system being
discontinued is not really exiting the rail transportation business, and should
it opt to resume common carrier service in the future, it could do so without
new licensing authority from the Board. Additionally, a carrier’s ownership of a rail
line right-of-way may not always be in fee simple, but rather in many instances
may consist of a lesser interest such as an easement for freight rail purposes
that is subject to reversionary interests held by adjacent landowners.In such cases, discontinuance authority typically
preserves the carrier’s property by keeping it in the national transportation
system and barring the vesting of those reversionary interests to prior owners;
abandonment, in contrast, does not.Lastly,
a person submitting an offer of financial assistance (OFA) under 49 U.S.C.
§ 10904 can, if the relevant requirements are met, force the carrier to
sell the affected lines to the OFA offeror in the
case of an abandonment, but not in a discontinuance.[8]By filing an entire-system discontinuance
application, a carrier would not be subject to a possible OFA sale, would avoid
labor protection, and could keep its property while stopping service.In short, a carrier like MRS that retains the
benefits of being a federally regulated railroad even as it discontinues all
service should also bear the responsibilities of that federal regulatory
system:i.e., labor protection to
those rail employees who are adversely affected when rail service is discontinued.

For these reasons, we will create an explicit exception tothe Entire System Abandonment policy (which
itself is an exception to the § 10903 statutory mandate).[9]Although
we recognize that rail carriers that continue to own their rail lines after
discontinuing service on their entire system may have difficulty with obtaining
the revenue necessary to comply with the statutory employee protection, revenue
is not the only factor to consider.If
it were, a carrier that owns its lines could circumvent the labor protection
requirements of § 10903 and be relieved of its employee protection obligations simply
by discontinuing, rather than abandoning, its operations.Moreover, under existing policy, carriers
that abandon most but not all of their lines may also have financial
difficulties complying with the statutory labor protection, and yet those
conditions clearly apply in such cases.We
think our general statutory responsibility to protect employees from such
potential harms outweighs concern about the carrier’s source of revenue in this
subset of cases where carriers will continue to receive the benefits of Board
jurisdiction. We have chosen to create
an exception to the Entire System Abandonment Policy to prevent a party from obtaining the
substantial benefits of remaining a regulated carrier while avoiding the labor
protection requirements of § 10903.Here,
MRS made a deliberate business decision to remain within the Board’s
jurisdiction and to enjoy those benefits.It is, therefore, reasonable to find that MRS should also bear the responsibilities
of remaining a regulated entity, one of which is to pay employee protection,
even if the carrier will not have revenue from operations on other lines to
subsidize that obligation.MRS could choose
to forego the benefits of remaining a regulated entity and seek abandonment
authority instead, which would, under the Entire System Abandonment Policy,
relieve it of any employee protection obligation.

Consequently, for the reasons discussed above and in the July 2011
Decision, we will authorize discontinuance by exempting from the prior
approval requirements of 49 U.S.C. § 10903 MRS’s proposed
discontinuance of service over its entire system in St. Louis, Mo., subject to
the employee protective conditions set forth in Oregon Short Line.

As discussed in the July 2011 Decision, because
this is a discontinuance of service and not an abandonment, the Board need not
consider OFAs under 49 U.S.C. § 10904 to acquire the lines for continued rail
service, trail use requests under 16 U.S.C. § 1247(d), or requests to negotiate
for public use of the lines under 49 U.S.C. § 10905.Moreover, environmental reporting
requirements under 49 C.F.R. § 1105.6(c) and historic reporting requirements
under 49 C.F.R. § 1105.8(b) do not apply.The OFA provisions under § 10904 for a
subsidy to provide continued rail service do apply to discontinuances, but the July
2011 Decision required any OFA to be submitted by July 22, 2011, and no
offers were received.Therefore, OFAs
may no longer be submitted in this proceeding.

This decision will not significantly affect either the quality of the
human environment or the conservation of energy resources.

It is
ordered:

1.Under 49
U.S.C. § 10502, we exempt from the prior approval requirements of 49 U.S.C.
§ 10903 the discontinuance of service by MRS of its operations over the
above-described lines, subject to the employee protective conditions set forth
in Oregon Short Line
Railroad—Abandonment Portion Goshen Branch Between Firth & Ammon, in
Bingham & Bonneville Counties, Idaho, 360 I.C.C. 91 (1979).

2.MRS is
directed to serve a copy of this decision on ABI, Century Used Bricks,
Universal Storage, and Loy Lange Box so that it is received by them within 5 days after
the service date of this decision and to certify contemporaneously to the Board
that it has done so.

3.Petitions to stay must be filed by February 21, 2013.Petitions to reopen must be filed by March 4,
2013.

I supported the July 2011
decision because I considered this case to be distinct from previous entire-system
abandonment and discontinuance cases considered by the Board.As such, I did not believe we were running
afoul of the agency’s “entire-system exception,” as termed by the court, but
instead, were obligated to follow the statutory labor-protective mandate as
directed by Congress.The court disagreed.

The court’s decision required the
agency to reconsider its July 2011 decision, which I have done, taking into
careful consideration the court’s opinion.While not always the preferred outcome for an agency, the court’s
directing a “do over” presented an opportunity to explain the distinctive facts
of this case.Unfortunately, the Board
has instead chosen to announce a new “exception to the exception” policy,
backed by a new rationale, which I cannot support.

The historical rationale for the
entire-system exception remains intact up to this point:rail operations conducted by MRS will not be
maintained to provide other employment opportunities for displaced workers, and
operating revenues will not be generated to fund dismissal allowances.But our analysis should not stop here.MRS, which is owned by Anheuser-Busch
Companies, Inc., has stated that upon receiving its discontinuance authority,
its sister subsidiary, Anheuser-Busch Incorporated, will use MRS’s tracks and
contract for switching services through a private operator.Presumably, this service is of value and will
benefit MRS, its affiliate, and its owner.MRS will continue to exist, keep its rail assets, and retain the ability
to resume rail service operations whenever it wishes to do so.This carrier may be unwilling to fulfill what
I interpret to be a statutory obligation to its displaced workers, but it is
hard to believe that it will not have the means to do so.There may be previous Board decisions that
say otherwise, but I disagree with the notion that a carrier’s true ability to
meet the statutory directive can never be relevant to the analysis unless those
means fall squarely into the limited exceptions of prior decisions.It should be taken into account on a case-by-case
basis rather than applying what has become a routine policy exception.

While I would support making a
modification to how we administer the policy at issue, I cannot go so far as to
support establishing a categorical “exception to the exception” based on
today’s rationale that paying employee protection is the responsibility a
carrier must bear for remaining a federally regulated entity.I believe a more sound and equitable approach
is to adjudicate each case on the record presented.

Finally, I am concerned that
establishing a blanket exception to the exception may have unintended
consequences.It may not be in the
public interest for this agency to push carriers, as today’s decision may do,
to exit the national rail system entirely in lieu of discontinuing
operations.Instead, we should be
encouraging those carriers that wish to remain part of the system to do so in
order for them to be in a position to restore jobs and service as soon as it is
economically viable to do so.Unfortunately, today’s decision may result in a permanent incentive for
a carrier to choose abandonment over discontinuance, simply so that it can
avoid paying its displaced workers.

Given the Board’s new rationale, I
cannot support altering the long-standing policy in this manner, and I must
dissent from the Board’s decision.

[1]The
digest constitutes no part of the decision of the Board but has been prepared
for the convenience of the reader.It
may not be cited to or relied upon as precedent.Policy Statement on Plain Language Digests
in Decisions, EP 696 (STB served Sept. 2, 2010).

[3]Because the court’s decision vacated the July
2011 Decision in its entirety, including the Board’s authorization (through
exemption) of MRS’s discontinuance of service, we are again authorizing the
exemption in this decision.The reasons
for granting the exemption in the July 2011 Decision have not been
challenged; therefore, we are incorporating by reference the original analysis
to support our authorization of the discontinuance here.

[6]This feature distinguishes these
circumstances, where we will not apply the Entire System Abandonment Policy,
from the more ordinary case where a carrier seeks to abandon its entire system
but will continue to operate as an unregulated private carrier.E.g., Sierra Pac. Indus.—Aban. Exemption—in Amador Cnty.,
Cal., AB 512X (STB served
Feb. 25, 2005); Almono LP—Aban. Exemption—in Allegheny Cnty.,
Pa., AB 842X (STB served Jan. 13, 2004).

[8]In a
discontinuance proceeding, an OFA offeror is
permitted only to offer to subsidize the discontinuing carrier’s service for
one year, not to purchase the line. SeePioneer Indus. Ry.—Discontinuance of Service Exemption—Line in Peoria Cnty., Ill., AB 1056X etal., slip op. at
4 (STB served Apr. 16, 2010).